JANUARY 15, 2003

The FIA's press statement

The FIA has announced a dramatic series of changes to the F1 rules which will force F1 teams to cut costs. The federation issued the following explanation of the changes:

Last October the teams currently competing in the FIA Formula One World Championship rejected all the FIA's suggestions to reduce costs. Subsequently, at their meeting on 4 December, they failed themselves to agree any significant cost-cutting proposals for 2003 or 2004. Urgent action is needed because costs continue to rise while income is falling.

THE PROBLEM

Two Formula One teams have disappeared in the past twelve months. Now that only ten teams are left, those remaining are obliged by the Concorde Agreement to finance and run two extra cars for each additional team which fails to attend an Event. By no means all of the teams would be able to do this. There is an obvious danger that unless something is done, the FIA Formula One World Championship will start to collapse during the next twelve months into a spiral of law suits and recrimination.

THE FIA'S ROLE

As the independent regulator, the FIA would not normally become involved in the commercial difficulties of Formula One teams. But the teams and others involved in the Championship have been unable to find a solution. Responsibility therefore devolves upon the governing body. The FIA must act, because serious problems with the Formula One World Championship would affect motor sport at all levels throughout the world.

CHANGING THE RULES

But the FIA is constrained by the Concorde Agreement. It cannot change any rule for 2003 without the unanimous agreement of the teams. For 2004 it can change sporting rules at any time before 31 October 2003 (subject to an 18:8 majority in the Formula One Commission), but cannot change technical rules without unanimous agreement. For 2005 it can again change sporting rules, this time until 31 October 2004. But technical (although not engine or drive train) regulations can be changed only for 2005 (with the same 18:8 majority plus an 80% majority in the Technical Working Group) and then only if this is done before 1 January 2004.

ENFORCING THE RULES

It is, however, open to the FIA to enforce the existing rules more rigorously. Having regard to the current difficulties facing its Formula One World Championship, the FIA intends to do so on a zero-tolerance basis wherever this will result in significant cost savings without diminishing the sporting contest. Indeed some of what follows may improve the racing by increasing the element of unpredictability. If the teams produce convincing evidence that immediate strict enforcement will add to costs in a particular area because of the proximity of the season, the FIA will grant a brief temporary derogation, but only where genuine need is shown.

WASTED MONEY

Much of the money spent in the FIA Formula One World Championship is wasted in the sense that it adds nothing to the enjoyment of the public. Yet it is the public who ultimately pay the bills. Without a world-wide television and media audience, neither team sponsors nor car manufacturers would contribute to the costs of the Championship. The interests of their shareholders require that they only invest in the hope of greater profits. These profits come from the public.

SOME EXAMPLES

But vast sums are being spent on things which do not interest the public. Whether an engine runs to 12,000, 16,000, or 20,000 rpm means nothing to the television audience. Neither do they know, or care, who makes the electronic control unit or the rear wishbone. The army of technicians using sophisticated and very expensive telemetry to follow every quirk of the car on computer screens, are hidden at the back of the pits. They are concealed from a public who neither know nor care that they are there.

RACING SPOILT BY MONEY

And this expenditure is not just wasted. Still worse from a spectator's point of view, much of it actually detracts from the sporting contest. This is because the purpose of much of the expenditure is to increase the probability that at the end of qualifying, the fastest cars will be at the front of the grid and will run reliably throughout the race. Everything being equal, if the fastest car starts the race at the front, it will not be caught, still less overtaken by the car behind. Add metronome-like reliability and faultless handling and you have all the ingredients for a thoroughly boring race.

CONTROLLING THE CAR MANUFACTURERS

The FIA cannot prevent the major car manufacturers spending very large sums on developing engines for the Formula One World Championship. It can, however, regulate the number of engines and other components each team can consume at races. In this way the cost of going racing, as opposed to development, can be minimized. The tighter the restrictions at the races, the lower the cost of going racing. The racing budget is then a smaller percentage of a manufacturer's total expenditure, making it easier to support an additional team.

THE SOLUTION

By rigorously applying existing rules, the FIA intends to save the teams and manufacturers a great deal of money. A probable side effect will be to make the racing itself less predictable and thus more interesting. By applying the rules firmly but equitably, the FIA will ensure that no team suffers an unfair disadvantage. The best driver and the best car constructor will still win their respective championships.

The rules in question and the effects of enforcing them are set out below. References are to the 2003 FIA Formula One Sporting Regulations unless otherwise stated. For convenience, the relevant regulations are reproduced at the end of this note.

2003

1. Under Article 61, there will be a complete ban on:

(i) telemetry from car to pit;

(ii) telemetry from pit to car;

(iii) radio communication between driver and pit.

2. Under Article 70, only two cars will be scrutineered per team (subject to the teams' other obligations under the Concorde Agreement, including but not limited to Clause 5.3.1).

3. Under Article 84e), spare cars will not be scrutineered (save in exceptional circumstances as authorized by the stewards) and will therefore not be used.

4. Under Article 71a), each car will be required to go into parc ferme immediately after making its second qualifying run. All cars will be released simultaneously from parc ferme shortly before the start of the race, when all checks on all cars will have been completed.

5. Under Article 61, severe constraints will be placed upon electronic (as opposed to driver) control of throttles, clutches, differentials and engine actuators. This will mean that traction control, launch control and fully automatic gear changing systems can no longer be used. Each team must be able to demonstrate compliance without software inspection (Article 2.6, FIA Formula One Technical Regulations as amended for 2003 on proposal of the teams). If it can be shown that immediate full compliance would, on balance, add to teams' costs because the start of the season is now so close, the FIA is prepared to grant a derogation for all or part of the 2003 season. However, from 2004 at the latest, the FIA will insist on full compliance with both Article 61 and the above-mentioned Article 2.6 and rely solely on physical inspection. In the absence of a satisfactory alternative proposal by the teams, the FIA believes that this will necessitate the use of standard electronic control units for both engine and drive train.

6. By way of clarification, the FIA confirms that teams which wish to do so can share components. The teams are invited to agree unanimously to delete the provision in Schedule III to the Concorde Agreement which prevents a constructor using a component (other than an engine or a gearbox) designed or manufactured by another constructor. In default of such unanimous agreement, the FIA confirms that provided a component is manufactured and designed by a separate company or other third party, there is nothing to prevent two different constructors using the same component(s) on their respective cars.

7. The FIA has confirmed that the Friday morning session will be a private test organized by the FIA together with the race promoter and is not part of the Event. Participating teams will be free to do as they wish, provided all safety precautions are observed and other participating teams are not needlessly obstructed.

(NB: the measures outlined above will reduce air freight costs in 2003 because fewer cars, fewer parts and less equipment will need to be transported. Such costs will drop further in 2004, 2005 and 2006 with the need to move fewer spare engines and major components. The need for ever fewer personnel will also save on air tickets and hotel rooms.)

2004

The FIA Formula One Sporting and Technical Regulations will be applied in 2004 in the same way as in 2003, subject to any changes in the light of experience.

8. For the avoidance of doubt, the 2004 single-engine rule will not apply to the Friday morning test session.

9. Standard electronic control units will be introduced (see 5 above) unless the teams propose an alternative and equally satisfactory method of proving the absence of driver aids, including traction control, launch control and fully automatic gearboxes by straightforward, physical inspection of components.

In addition, and subject to the necessary Formula One Commission vote no later than 31 October 2003, the following changes will be made to the FIA Formula One Sporting Regulations for 2004.

10. The FIA will invite the major manufacturers currently supplying engines to teams competing in the Championship to ensure collectively that all teams have competitive engines at a readily affordable cost. In default of satisfactory and agreed arrangements, the FIA reserves the right to introduce a change to the Sporting Regulations to achieve this result. (NB: the savings to an engine supplier by reason of the single-engine rule for 2004 will normally exceed the costs of supplying a second team. This is because development costs will have been met in supplying the first team while, as a result of the new rule, the total number of engines supplied to the first and second teams together in 2004 can be expected to be less than the number supplied to the first team alone in 2003.)

11. After consultation with the teams, the FIA will prepare a list of major components which, like the engine, may not be changed more than once during a race weekend from 2004 onwards.

12. A standard FIA rear wing and sideplates will be fitted to all cars. Such a wing would provide "Monza" levels of downforce while generating enough drag to give approximately "Brazil" levels of top speed. It will not only save money, but also reduce speed in the fastest corners. This will significantly improve safety.

13. Standard brakes. The FIA will invite tenders to supply a single standard braking system for all cars participating in the FIA Formula One World Championship. The winner of the tender will supply the same braking system to all teams. This will be the only system allowed in the Championship. Any financial or other benefits of the tender will go to the teams.

2005

Subject to the necessary Formula One Commission vote no later than 31 October 2004, the following changes will be made to the FIA Formula One Sporting Regulations for 2005.

14. The single engine rule will be extended from one to two Events - ie an engine must last for two consecutive Events in the same year before being changed. This will result in a further substantial reduction of teams' and engine suppliers' costs. It will also help to keep power outputs within reasonable limits.

15. A further extension in minimum life for certain major components after consultation with the teams.

16. In the light of experience, during 2004 it may be necessary to revise the penalties to be applied in the event of a team being forced to change an engine or a major component before this becomes permissible under the relevant rule. The penalties must be sufficient to deter systematic changes, but not so severe as to interfere excessively with a team's competitive position or to demotivate team or driver.

2006

Subject to the necessary Formula One Commission vote no later than 31 October 2005, the following change will be made to the FIA Formula One Sporting Regulations for 2006.

17. The single engine rule will be extended from two races to six races. This will have a huge impact on the cost of supplying a team with engines, but no effect on the sporting contest. It may also avoid the need to change the engine regulations for 2008 in order to limit power for safety reasons. Moreover, it will enable an engine supplier to supply a third or even a fourth team at no greater cost than the 2004/5 programme (see 10 and 14 above), thus avoiding a crisis if the number of major manufacturers (engine suppliers) decreases. Once again, research and development costs are the same while race costs are a straightforward function of engine life - the longer the life of an engine, the lower the cost of supplying a team with engines for a season's racing. (NB: the claim that it costs more to develop an engine to give maximum power for, say, 5000 km than for 500 km is difficult to justify. The only difference is extra time on the dyno, which represents a negligible proportion of the total cost of developing an engine. Extra track testing time can be discounted, as this will also be used for a team's general chassis test programme. There is no significant difference between research into the ability of a component to resist maximum and very high stress for a short period or maximum but slightly less stress for a longer period.)

FURTHER MEASURES

The above are measures which the FIA can implement by enforcing existing rules or with a majority vote in the Formula One Commission. However, there is one additional measure which could further substantially reduce costs but which may require unanimous agreement, at least if it is to be introduced within a reasonable time frame.

18. Restrictions on materials. The use of exotic materials is a significant and increasing cost for competitors in the Championship. Limiting materials according to physical characteristics has proved complex and difficult to enforce. It can also lead to increased costs - the aluminium-beryllium experience has shown that more money may be spent seeking materials on the limit of permitted physical characteristics than can be saved by eliminating a particular material or family of materials. However, a list of permitted materials, all others being prohibited, might work. Checks might rely on chemical analysis, spectroscopy or similar methods. To be discussed with team and industry experts.

ENGINE SUPPLY

Finally the requirement to supply engines to other teams (point 10 above) may become problematic if the number of car manufacturers involved in the FIA Formula One World Championship decreases significantly. In the first instance we believe we will have overcome this problem by increasing the life requirement of the engines - the greater the number of races between engine changes, the less onerous a requirement to supply more than one team. However, at a certain point, even with six-race engines, this could place an excessive burden on the remaining engine suppliers. We would then have to enter into discussions with those concerned in order to find a solution. In the most extreme case, however, a single-source engine supply might be the answer.